Court Hands Down Historic Sentence Over ACE Coin Manipulation
A South Korean court has sentenced Lee Jong-hwan, CEO of a local cryptocurrency firm, to three years in prison for manipulating virtual asset prices-marking the first-ever conviction under the country’s Virtual Asset User Protection Act.
On February 4, the Criminal Division of the Seoul Southern District Court found Lee guilty of orchestrating an artificial trading scheme involving ACE Coin, which was listed on the exchange Bithumb. Alongside the prison term, the court imposed 500 million won in penalties and an additional 846.56 million won fine for violating user protection rules.
A former employee, Kang Min-cheol, who was charged as an accomplice, received a two-year prison sentence suspended for three years.
How the Manipulation Scheme Worked
According to reporting by Hankyung, the court found that Lee engaged in systematic price manipulation between July 22 and October 25 of last year. He repeatedly executed high-priced buy orders followed by low-priced sell orders within extremely short intervals, a pattern the court said lacked any rational investment purpose.
Judges noted that this structure made profits unlikely while increasing losses if prices declined, concluding that the sole objective was to inflate trading volume and distort market signals rather than pursue legitimate returns.
The ruling also highlighted Lee’s use of “dummy buy orders”-large orders placed deep in the order book with little chance of execution. These orders created the illusion of strong buying pressure, forming a visible buy wall that could mislead other traders into believing demand was rising.
Court Rejects Prosecutors’ Profit Estimate
Prosecutors alleged that Lee generated 7.1 billion won in illicit gains, but the court rejected this figure, citing insufficient and imprecise calculations. According to the judges, the prosecution failed to accurately account for transaction sizes, commissions, and included trades not covered by the indictment.
As a result, Lee received a lighter sentence than prosecutors sought, who had requested prison terms of 10 years and six years for the defendants.
First Conviction Under Korea’s New Crypto Law
This case is widely regarded as the first verdict issued under the Virtual Asset User Protection Act, which came into force in July 2024. The court acknowledged the precedent-setting nature of the decision, stating it was likely the first ruling of its kind since the law’s enactment.
Judges described the offense as a serious felony that undermines confidence in virtual asset markets and damages fair price discovery, a core principle of market integrity.
Legal experts say the ruling clarifies how manipulation typically unfolds in illiquid crypto markets. Attorney Lee Bo-hyun of Hwawoo Law Firm noted that inflating volume to fabricate buying pressure is especially effective on exchanges without strong institutional liquidity providers.
Regulators Tighten the Net
Under the new law, unfair trading practices can result in a minimum one-year prison sentence or fines worth three to five times illicit gains, capped at 4 billion won. Oversight authority now rests with the Financial Services Commission (FSC), with inspections handled by the Financial Supervisory Service.
The FSC can investigate suspected manipulation, order business suspensions, impose corrective measures, or refer cases directly to prosecutors-signaling a much tougher enforcement era for South Korea’s crypto market.
